China recently announced broad new curbs on the export of rare earth elements, as well as products made with them. This extension comes at a time when U.S. trade relations are increasingly turning hostile. Secondly, it has sent shock waves through those global industries that depend deeply on these materials. China is currently the world’s largest producer of rare earths at 60 percent. We’ve emphasized that its decision will have far-reaching implications for technology manufacturers and international markets.
The new export controls are poised to shift the global playing field for rare earth production and distribution. Rare earths are key materials in many technologies, from smartphones to electric vehicles to renewable energy technologies. They are a key link in helping create the high-tech products of today and tomorrow. Any change in their supply chain can push back schedules and increase expenses for tech manufacturers across the world.
Indeed, industry analysts expect non-Chinese companies to benefit significantly. They are busily making joint project searches for new sources of rare earths to produce. This means these countries and companies will have to accelerate their production capabilities to meet the market demand now that China has stepped back from the industry. That would be a major change to the concentrated supply chain of rare earth elements that currently exists. It will further serve to minimize the world’s overwhelming dependence on China.
China’s long-held monopolization of the rare earth market is well known, having produced over 90 percent of the global supply. The country is protective, using its status as currency issuer to shape international markets to its advantage. This step has raised alarms with other countries about security of supply and price instability. In response, countries are now re-evaluating their own strategies for procuring these strategic materials.
It’s a time of great uncertainty for technology manufacturers as the expression of the effects of China’s restrictions materialize. Many companies have already begun to explore alternative suppliers and are investing in technology to recycle rare earth elements from used products. This move toward sustainable practices can help reduce some risks of ongoing supply chain disruptions caused by the new export controls.